Signs of Recovery Are Budding

NEW ENGLAND. Slow-paced recovery at best is forecast for the six Yankee states. From region to region across the country, recession appears to be ebbing. After a long decline, housing and manufacturing seem to be strengthening. But state budget woes will likely slow the upward trend.

WHILE much of the United States has begun to emerge from a national recession, New England is not expected to recover from its own economic downturn for another six to nine months, economists say. Since early 1989, the region has been hit with high unemployment, a slumping real estate market, and state budget shortfalls. New England is expected to lose 50,000 jobs by the end of this year, with the regional unemployment rate peaking at 8.2 percent this summer, according to Sara Johnson, an economist with DRI/McGraw-Hill, a consulting firm based in Lexington, Mass.

Analysts say the economy will pick up soon but that restructuring in the high-tech, defense, and financial-services industries will have more long-term effects. "The national recovery is at our doorstep, the regional recovery is a step or more away, and there is room for missteps," says Frederick Breimyer, president of the New England Economic Project, a regional economic forecasting group.

Massachusetts had an unemployment rate of 9.6 percent last month. Much of the state's job loss has been in the construction and manufacturing industries, and both sectors are beginning to turn around, Ms. Johnson says. The state's manufacturing industry lost 40,700 jobs last year; a loss of 29,200 jobs is predicted for this year, Johnson says. She expects the trend to continue into next 1992.

On the positive side, the Massachusetts state government projects an $80 million surplus for fiscal year 1991.

The region's banking industry is still struggling. Last January, federal regulators took over the troubled Bank of New England.

Rhode Island also made headlines early this year when Gov. Bruce Sundlun closed 35 credit unions and 10 banks and investment companies. And three of New Hampshire's eight major banks now are technically insolvent.

Although Rhode Island lost many manufacturing jobs in recent years, its overall economy hasn't been hurt as badly by the real estate bust as has Massachusetts, says Gary Ciminero, economist at Fleet/Norstar Financial Group Inc, in Providence. Economists say prospects for the Ocean State's jewelry industry look promising.

Northern rural New England seems to be weathering the recession better than are the more populated and industrialized areas.

State budget problems persist. Connecticut faces a $2.7 billion deficit for 1992 with Gov. Lowell Weicker pushing for a controversial state income tax. Besides its fiscal troubles, Connecticut's manufacturing and insurance industries are also doing poorly. But the state's defense industry is not faring as badly as expected, with several of the state's defense companies receiving recent government contracts, according to Edward Deak, economist at Fairfield University.

The area's two northernmost and least industrial states seem to be weathering the recession better than the four that are more populous and industrial.

Although Maine faces serious declines in manufacturing and construction, the state's big paper industry has experienced "no major mill closures," says Dick Spellman, manager of marketing services at Central Maine Power Company. "Nobody is saying, 'We're folding up our tents and leaving the state of Maine.

Vermont is likely to emerge from the recession as soon as the end of this year, according to Jeffrey Carr, an economist at Economic Policy Resources Inc., an economic forecasting group based in Burlington. One reason is that the Green Mountain State is located far enough away from the now-troubled "growth hot spots of New England" such as the high-tech and defense industries.

Vermont is more heavily dependent on other industries, like tourism, he says, adding that "a strong summer and fall tourist season could help cushion the blow" of the recession.

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